Tuesday saw shares of former US President Donald Trump's Trump Media & Technology Group soar up to 59% during its Nasdaq debut, elevated by his supporters and giving him a prospective windfall as he deals with the expenses of several lawsuits.
The market capitalization of TMTG reached $10 billion when valued on an undiluted basis at its session peak of $79.38 a share. This is an enormous figure for a company that, during the first nine months of 2023, had an operating loss of $10.6 million on revenue of a mere $3.4 million.
The shares closed at a 16% increase at $57.99, pricing the company at roughly $8 billion.
The last estimate for Trump's controlling ownership in TMTG was roughly $6 billion, though he may not be able to sell or borrow against it for six months due to lock-up limitations.
TMTG made its stock market debut after a merger with blank-check firm Digital World Acquisition Corp. announced in 2021 that suffered from delays and setbacks.
Since the announcement of the merger, Digital World and the recently listed TMTG have increased in value by about 600% combined. This has solidified TMTG's reputation as one of Wall Street's "meme stocks," which are well-liked by retail investors and whose movements can be fueled by social media posts.
Thomas Hayes, the chairman at Great Hill Capital, said that although the company is valued well in relation to its underlying fundamentals, he would not invest in it in the near future.
This valuation might not accurately reflect the underlying business potential, but rather serve as a gauge of Trump supporters' fervor.
Trading in the stocks under the new ticker "DJT" was temporarily suspended shortly after the opening bell because of volatility.
It was the most trending stock, according to Stocktwits, a social media and trading platform focused on retail traders.
After the completion of the merger, shares of Digital World Acquisition Corp., now known as TMTG, had increased by over 35% on Monday.
Trump's financial difficulties
In his quest for the presidency of the United States, Trump is being prosecuted in four separate criminal cases and has had difficulty raising money for his presidential campaign and legal defense.
The corporation also gives Trump supporters a means to wager on his electoral comeback, as seen by the roughly threefold increase in the value of shares of the shell firm Digital World Acquisition this year.
Dan Coatsworth, an investment analyst from AJ Bell, said the current price action and valuation are wholly inconsistent with the underlying business and its future prospects.
Truth Social, a social media platform owned by TMTG, would also get $300 million in funding as part of the agreement.
Launched in February 2022, Truth Social aimed to profit from the prohibition on Trump's accounts on various social media sites, including Twitter (now X) and those managed by Meta sites. It also catered to users who felt that conservative perspectives were being silenced on other social media sites.
8.9 million people signed up for Truth Social in February, as per a regulatory filing. According to official figures as of June 2022, X had 238 million active users on a daily basis, whereas Reddit and Facebook had 73 million and 2.1 billion, respectively.
At the peak of the Tuesday rally, Truth Social had a valuation of almost $1,000 per new sign-up, while Reddit, X, and Snapchat were valued at $147, $80, and $46 per active member, respectively.
According to a filing made by Digital World last month, Trump might sell his interest in Truth Social and stop involvement in its operations depending on how his presidential campaign plays out.
The US Department of Justice has been looking into the blank-check company since it signed the merger deal with Trump's firm in October 2021.